Study: Advisors’ ability to grow a successful practice will be linked to their ability to adapt to new regulations and to lead clients away from emotional decisions

2016 Financial Advisor Survey Whitepaper

Financial advisors globally are anticipating nearly 10% business growth in the next 12 months. However, only 47% believe growth will be the result of market action. Instead, three quarters say their growth will come from winning new clients or earning a greater share of business from current clients.

Our 2016 Global Survey of Financial Advisors finds that in pursuit of this goal, advisors face critical decisions about how they structure their practice, how they manage clients and how they select investments.

“The challenges facing financial advisors are tougher than ever, as they are asked to do more with less in an environment that seems to put low fees ahead of all other considerations, including risk management,” said John Hailer, CEO of Natixis Global Asset Management for the Americas and Asia. “We applaud the efforts of financial advisors to understand their clients’ risk tolerance and financial goals and tailor their portfolios accordingly. Low cost does not always equate to good value, and what’s lost in the big picture is the importance of professional guidance and risk management, especially in today’s complex and volatile markets.”

The Natixis 2016 Financial Advisor Survey was conducted in July 2016 with participation from 2,550 advisors in 15 countries in Asia, Europe, the United Kingdom and the Americas.

The survey’s key findings include:

Practice management: Heightened regulations and increased fee pressures are leading advisors to focus on their role as business owner.

  • Seven in ten say they will make least some changes in their business model as a result of new regulations and close to half (48%) say they will need to change their business model in order to sustain business growth.
  • The pressure is so great, 25% say they may consider selling their practice, merging with another firm, retiring or exiting the industry altogether.
Client management: Faced with unrealistic expectations and irrational behaviors, one of the biggest challenges for advisors may simply be keeping clients invested.

  • Overall, 86% of advisors tell us their success is linked directly to their ability to manage client return expectations. But investors globally say they expect returns of 9.5% above inflation, while advisors say expectations for 5.3% above inflation are more realistic.
  • It’s no wonder that 85% say their ability to prevent clients from making emotional decisions is a critical success factor and say they are challenged to get an accurate picture of client risk tolerances.
Investment management: Delivering on the investment side in an environment marked by high correlations, low yields and erratic periods of volatility means advisors must navigate a range of investment challenges.

  • Two-thirds of advisors worldwide believe investors have a false sense of security about passive investments, and about the same number say investors are unaware of the risks associated with passive investments.
  • Advisors may use passive in their portfolio mix, but they are turning to passive for two reasons, managing fees and accessing efficient asset classes.
Success for many financial advisors in 2016 may really be a balancing act. Their ability to grow a successful practice will be directly linked to their ability to adapt to new regulations, to lead clients away from emotional decisions, and to make sound, strategic decisions in how they select investments for client portfolios.

For more on the 2016 Global Survey of Financial Advisors,
watch video.

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